BILL ANALYSIS Ó
AB 1233
Page 1
ASSEMBLY THIRD READING
AB
1233 (Levine)
As Amended January 4, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Governmental | | | |
|Organization | | | |
| | | | |
|(vote not | | | |
|relevant) | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Labor |5-2 |Roger Hernández, Chu, |Harper, Patterson |
| | |Low, McCarty, | |
| | |Thurmond | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |12-4 |Gomez, Bloom, |Bigelow, Gallagher, |
| | |Bonilla, Bonta, |Jones, Wagner |
| | |Calderon, Daly, | |
| | |Eggman, Eduardo | |
| | |Garcia, Holden, | |
| | |Quirk, Weber, Wood | |
| | | | |
| | | | |
AB 1233
Page 2
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SUMMARY: Provides a statutory definition for a "de minimis"
public subsidy that does not trigger the requirements of
prevailing wage law. Specifically, this bill:
1)Defines "de minimis" to mean a public subsidy that is both
less than $250,000 and less that 2% of the total project cost.
2)Specifies that this bill does not apply to a contract that was
advertised for bid, or a contract that was awarded, before
January 1, 2017.
EXISTING LAW:
1) Requires the prevailing wage rate to be paid to all workers
on "public works" projects over $1,000.
2) Defines "public work" to include, among other things,
construction, alteration, demolition, installation or repair
work done under contract and paid for in whole or in part out
of public funds.
3) Establishes a definition for "paid for in whole or in part
out of public funds," as specified.
4) Provides that if the state or a political subdivision
reimburses a private developer for costs that would normally
be borne by the public, or provides directly or indirectly a
public subsidy to a private development project that is "de
minimis" in the context of the project, an otherwise private
development project shall not thereby become subject to the
requirement to pay prevailing wages.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, this bill would result in minor and absorbable costs
AB 1233
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to the Department of Industrial Relations (DIR).
COMMENTS: According to the author, this bill will clearly
define when a public subsidy is "de minimis" for the purpose of
determining when prevailing wage law applies to certain
projects. The sponsor argues that the legal definition of de
minimis is "trifling, minimal...so insignificant that a court
may overlook it." Unfortunately, in recent years, DIR has
strayed from this legal definition of "de minimis", and lacking
a definition in statute, has loosely interpreted the definition
to apply to subsidies ranging from thousands to millions of
dollars. They contend that this bill would create a clear
statutory definition by providing that a subsidy is "de minimis"
if it is both less than $250,000 and less than 2% of the total
project cost.
The sponsor notes that the exception was created in SB 975
(Alarcón), Chapter 938, Statutes of 2001. However, by not
specifically defining "de minimis" for the purpose of
determining when prevailing wage is applied to projects and
given no other guidance as to the appropriate measure of what
should be considered de minimis in the legislative history,
several projects have moved forward that should have been
covered by the prevailing wage law but were not.
As a result, the sponsor argues that there has been uncertainty
over the definition of "de minimis" over the last decade. DIR
has made determinations of "de minimis" on projects that have
had public subsidies given to developers that have ranged from
$65,710 to $4.5 million.
The sponsor concludes that a public subsidy as much or more than
the definition used in this bill is a notable amount of taxpayer
investment in a project and arguably is not "de minimis", so it
is reasonable to require payment of prevailing wages if the
developer wants a public subsidy over that amount.
AB 1233
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Opponents argue that when SB 975 was enacted in 2001, there was
extensive debate regarding the "de minimis" exception. Although
never codified, opponents contend that there was general
agreement among the stakeholders that the trigger for the
exception was 2% of the total project cost. This was a level
the stakeholders generally agreed was reasonable to ensure that
there is a true and substantial public investment in the project
before other state mandates come into play.
Opponents contend that this bill further caps that contribution
at specific dollar amount, which may be inappropriate on large
multi-million dollar projects.
Finally, opponents note that Governor Brown vetoed similar
legislation in 2013 and 2015.
Analysis Prepared by:
Ben Ebbink / L. & E. / (916) 319-2091 FN:
0002560